Buying property in Spain through a legal entity

Real estate in Spain is a very attractive idea for many  foreigners. Moreover, interest in it is observed not only from personal, but also commercial purposes.

Many who move here to live, over time, begin to think about creating their own business or expanding it, sometimes requiring a new workspace. Then it becomes necessary to find a suitable room. And after finding it, the question arises about taxes that will have to be paid when buying in addition to the sale amount for real estate.

In case of purchasing a new home, 10% VAT applies. When buying a commercial space or a new office, VAT is 21%. It is important to consider this important factor when planning the budgeted budget.

But there is a way to avoid this!
If the purpose of acquiring real estate is commercial, then in this case it is worth considering buying premises from a legal entity. In particular, it is recommended to pay attention to this option if you are planning a deal with a company.

First, it will significantly help save on taxes. The reduction in the amount is due to the waiver of the standard VAT tax.

In Spain, there is a rule: when buying a commercial premises for the purpose of its intended use, which in turn generates VAT, a legal entity has the right, under the Inversión del sujeto pasivo law, to request a VAT exemption and, as a result, not to pay anything in the transaction. For example, this is possible in the case of a planned activity, such as renting an office.

After registration of the deed of purchase and sale, it will only be necessary to pay the AJD tax (Tax on documented legal acts or Stamp duty). Since, in each autonomous region of Spain, it is different, it is necessary to clarify in a separate case directly in the city where the object is located. So, in Marbella, AJD is 1.5%.

Secondly, if you are looking to purchase a home for further renovation and resale within 5 years, then you, as a renovation company, can qualify for a 2% ITP bonus tax on purchase.

But this scheme does not work when purchasing ordinary real estate for personal use. In Spain, there is a concept of “fictitious rent”! If you bought a living space on behalf of the company for the residence of a co-founder or administrator, then for the tax service this fact is considered nothing more than a lease.

As such, the company must report and pay taxes as a rental income at the market value of the average rent in your area with a home with similar characteristics!

Do you want to buy real estate for business? Our experts will help you.

We will help you with the search for the optimal and legally clean premises specifically for your conditions, we will select and calculate the most profitable way to purchase it and, of course, we will help you complete a purchase and sale transaction from “A” to “Z”. Trusting professionals, you will reduce the risk of unforeseen surprises, thereby saving time, nerves and finances.